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[Type the company name]
[2011-12]
Cost Accounting
Contract costingN.JASMINE
[ T y p e t h e c o m p a n y a d d r e s s ]
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N.E.S RATNAM
COLLEGE OF
ARTS, SCIENCE
& COMMERCE
BHANDUP (W)
Topic name:
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CONTRACT COSTING
Subject name:COST ACCOUNTING
class:
SYBBI
under the guidance
of :
PROF. MRS. RIYA
RUPANI
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ACKNOWLEDGEMENT
I would express my sincere thanks to
Prof.Mrs.Riya Rupani for giving me this
opportunity or platform to interact with
widespread. I would like to thank my friends
who have supported me throughout incompleting this project.
I am equally grateful to those who gave me
moral support & guided me in different
matters regarding the topic. My professor had
been very kind & patient while suggesting me
the outline of the project & clearing my
doubts. I thank everyone for their support.
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CERTIFICATE
This is to certify that Miss NADAR JASMINE
EBAN roll no: 23 of SYBBI OF N.E.S RATNAM
COLLEGE has completed the project
successfully on CONTRACT COSTING in COSTACCOUNTING subject. Under the guidance of
Prof. MRS RIYA RUPANI for IVth semester in the
academic year 2011-2012
Date: Signature of Co-
ordinator
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Place: Signature of professor
Index
Sr.No Contents Page No
01 Introduction 07-08
02 Features 09
03 Terms 10
04 Conclusion 11
05 Reference 12
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INTRODUCTION
Contract costing is also known as terminalcosting as it discharges the contract when the work
is done. It is a form of job costing and for this
reason both contract and job costing methods are
based on the same costing principles. The
difference between these two is that in job costingthe cost unit is relatively small, whereas in contract
costing cost unit is big. It has been well said that
a job is a small contract and a contract is a big
job. As the cost unit in contract is relatively high,
it takes a considerable time to complete. Contract
costing is employed in business undertakings
engaged in building construction, road
construction, bridge construction and other civil
engineering works.
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A firm engaged in the construction worksrequires to know the total cost of the construction
work done. The total costs of the work help to find
out the profit earned from these works. The cost
information about construction works helps to
monitor and evaluate the performance of contract
work and to determine the total contract cost.
Such information is provided by a costing method
known as contract costing.
Contract costing is the costing method appliedto determine the cost of construction work
performed as per a customer's specification. The
construction work is undertaken at the site allotted
by the client. The contract sites vary and are
always outside the premises belonging to theclients. A separate code number is allotted to each
site where a number of contract works are
undertaken. A contract account is maintained for
each contract work to record the contract costs
under contract costing. Maintaining a contract
account helps to find out the amount of profitearned during a particular period since financial
books do not report it separately. Normally, a
contract account is prepared at every year-end to
determine the profit for the specified period.
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FEATURES
1.As the contracts are of large size, a contractor
usually carries out a small number of contracts
in the course of year.
2.Contracts are carried out away from the
contractors premises.
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3.Contracts may continue over more than one
accounting period.
4.A separate account is prepared for each
contract to ascertain profit or loss in each
contract.
5.Specialist sub contractors may be employed
for say, electrical fittings, welding work, glass
work etc.
6.Plant and equipment may be purchased orhired for the duration of the contract
7. Payments by the customer (contractee) are
made at various stages of the contract.
BASIC TERMS IN CONTRACT COSTING
1. Escalator clause : It is also termed as escalation
clause. In this case contractor is required to
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increase the contract price if there is increase
in the elements of cost beyond a percentage
over the prices prevailing at the time of
tendering quotation.
2. Contract : A contract is a task or an assignment
undertaken to complete a construction work
within a specified time.
3. Contractor : It is the construction company or
an individual who undertakes the construction
work.
4. Contractee : It is the party or the person who
has assigned the contract to the contractor.
5. Contract price : It is the consideration for which
the contract is undertaken. On completion of
the project the contractee pays the full amountto the contractor of the contract price.
6. Work certified : It is that portion of the
completed work which is certified by the
architect or the surveyor,
7. Work uncertified : It is that portion of the work
completed by the contractor, but not yet
certified by an architect or the surveyor.
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8. Retention money : Some percentage of the
work certified is retained by the contractee till
the completion of the work.
9. Notional profit : It is an estimated profit in
respect of work certified. And balancing
amount on the debit side.
CONCLUSION
With this I conclude that contract costing is fully
based on constructions, to keep a record for theexpenditure and the income, contract costing is
prepared. It is very help full for the contractors and
very easy to maintain. Normally contract costing
are done for a particular period of time till the
completion of the project and the contract costing
is terminated hence it is also said as terminalcosting.
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REFERENCE
Webliography:
Carocks.files.wordpress.com
Jkshahclasses.com
Bibliography:
Cost accounting (S.Y BBI)
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